Stagflation – Higher Unemployment with Inflation

The Disappointing jobs growth showing poor figures boosted optimism that the Federal Reserve will act to stimulate the economy next week. The nonfarm payrolls report, which showed job growth of only 96,000 last month, came a day after bold action by Europe to stem the debt crisis drove the US share markets higher with the S&P achieving its highest close since January 2008. The Dow ended at its best level since the end of 2007 while the NASDAQ hit a 12-year high. This is all pretty much on target for this time of year. Even gold has rallied into this target period as the computer projected in the 2012 Forecast Report.

The Clinton Speech about how he had great math skills to balance the budget is not exactly what he portrayed. I wrote an OpEd for the Wall Street Journal in 1995 on this very topic. Clinton did not create a miracle – it was fancy footwork – that was it.

http://armstrongeconomics.com/the-clinton-debt-crisis-wsj-oped/

The claims of cutting spending must be put in proper perspective. They are not cutting spending right now. They are cutting anticipated spending in the future. It is as if you gave your credit card to your 16 year-old daughter. She buys a sweater for $1,000. You say what are you doing? She says she saved you $2,000 because she really wanted to buy one for $3,000. So, you should reward her for saving you $2,000. This is Washington Logic. By 2014, the rood should start to cave in. All of these claims and nonsense will be revealed for what they are.

The economy is still contracting. We are entering a period of Stagflation where we will eventually see inflation take hold and interest rates will rise, but we will also see a further economic decline and still terrible news in the employment front. This also applies to Europe. So hold on. This trend is still brewing.

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